What are the two primary factors that influence a firm manager’s choic

What are the two primary factors that influence a firm manager’s choice between a labor-intensive and a capital-intensive method of production? How does each factor influence the manager’s choice.

What will be an ideal response?

ANSWER

The two primary factors are the technology of the production process and the prices of the inputs of production. The technology determines the marginal productivity of the different inputs that can be used in the production process. Combining information on the marginal productivities with the respective prices of the inputs tells the manager how much output is produced per dollar spent on each input. With this information, the manager can then select the combination of inputs that yields a given level of output at least cost.